Inflation Nears The 'Red Zone,' Odds Of The Fed Hikes Rise
The Federal Funds futures are pricing an 11-12% probability of a Fed hike by December and 35% by March, as 10Y breakeven inflation approaches the 2.5% 'red line.' The bond market is leading by pricing in hikes and higher inflation, while the stock market lags, focused on AI and strong earnings.
The Federal Funds futures are now pricing almost a 12% probability of a Fed hike by December. The odds of a Fed hike increase as 10Y breakeven inflation approaches the critical 2.5% 'red line.' A breakout would force the Fed to consider hikes, similar to 2022. The bond market is pricing in hikes and higher inflation, while the stock market remains focused on AI and strong earnings. The Federal Funds futures are pricing a 35% probability of a Fed hike by March.
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